Move over, Howard Stern. Macrovision (Nasdaq: MVSN) wants to step up to the throne to be crowned the king of all media. Last month, it quite literally began ruling over "all media" after its purchase of All Media Guide Holdings, a content-rich provider of metadata for music, movies, and video games. This morning, it is making the leap to the boob tube with the $2.8 billion purchase of Gemstar-TV Guide (Nasdaq: GMST).
Gemstar investors won't be happy with the deal, initially. The cash offer of $6.35 a share is just a 6% premium to yesterday's closing price. Gemstar shareholders can opt to go with a fractional 0.2548 share of Macrovision for every share they own. That is a healthier 11% premium to Macrovision's closing price last night, though it's actually a 12% discount this morning after Macrovision's stock opened 20% lower.
That's the problem. With the math now calling for a stampede into the cash option, Macrovision will only cash out up to $1.55 billion worth of the investment. Unless Macrovision shares recover over the next few weeks, Gemstar investors will have a pro-rated balance of cash and stock even if they go with the all-cash lifeboat.
This stinks, but no one is going to shed a tear for Gemstar. The stock closed at $5.34 the day it announced that it was hoping to smoke out a suitor back in July, and did anyone really think that someone would step up to buy a dinosaur like the parent company of TV Guide?
Really, now: When was the last time you found yourself even leafing through a TV Guide? Don't tell me it was sometime after Welcome Back, Kotter and Starsky & Hutch ruled the prime-time airwaves? It became all but obsolete the moment the Sunday papers began putting out their own television listing guides. Then it became absolutely obsolete when cable companies and set-top box makers automated their on-screen guides. Your cable channel listings may have a TV Guide network that scrolls through the current shows, but you can find the same functionality with your TiVo (Nasdaq: TIVO) DVR or digital boxes from cable and satellite providers like Comcast (Nasdaq: CMCSA) and DirecTV (NYSE: DTV).
To be fair, Gemstar is about more than just a supermarket-checkout relic of a magazine. The company's bread-and-butter business is its rich technology portfolio, where its interactive-programming-guide patents are thriving to the point of easily offsetting declines in its VCR Plus+ royalties. In other words, the company is profiting even from the companies that are seeking to displace it.
Macrovision hopes to make a meaty stew of all of Gemstar's parts, even the inedible chunks. The dream is to create a one-stop solution for digital homes, but going by the precipitous drop in Macrovision's stock, the market isn't convinced. Even if today's drop means that Macrovision would be wolfing down all of Gemstar for less than what Gemstar closed at yesterday, Wall Street is concerned that Macrovision is biting off more than it can chew. With a market cap that is less than half of Gemstar's, the little nibbler is going to have a challenging digestive process.
Then again, I've seen enough nature shows to know that's the kind of scenario that makes for good television.
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